O2 Rises on Telefonica Bid

ABN Amro climbs on third quarter report; plus more of Monday's European stocks in the news

From Standard & Poor's European MarketScope

France br> SocGen was up €1.30 to €94.00. Morgan Stanley raised its target to €105 from €100 and kept its overweight rating after raising short and medium term earnings forecast to reflect a more upbeat view of equity derivatives. The broker forecasts global EDQ revenues growth of 10% in fiscal 2006, driven by increasing demand for structured products, the search for yield, repair of asset liability mismatches and growing trade in exotic risks. The firm thinks the company will retain leading positions owing to its significant platform, strength of human capital and access to retail distribution.

Saint Gobain was up €0.60 to €45.68. Pilkington shares have risen this morning on takeover speculation that the company could switch its attention after failing to secure a significant stake in BPB. Meanwhile, the company has told Bloomberg a switch into the UK's Pilkington would be blocked by the EU and therefore impossible.

Vivendi Universal (V ) was up €0.81 to €25.99. The shares traded higher Monday morning on read-across after Spain's Telefonica announced that it has agreed an offer with UK's O2 for a takeover at £2.00 per share, or £17.7 billion.

Germany br> Deutsche Telekom (DT ) was down €0.08 to €14.65. Spain's Telefonica has agreed an offer for UK's O2 in a deal worth some £17.7 billion. From a strategic point of view, the deal increases geographical diversity as Telefonica will enter the UK and German markets. Kepler expects the company to make a counterbid. The company won't comment on such a move.

BMW was down €0.14 to €36.38. The company has no plans to trim its 2005 profit target. The statement from the company follows a report on Dow Jones Newswires that claims the company expects 2005 earnings to be flat or down 10% on the year. On the broker front, Morgan Stanley has cut its 2005/06 EPS estimates to €3.10 from €3.30 and €3.30 from €3.40, respectively, and has lowered its pretax estimate to €607 million from €774 million.

Linde was up €0.88 to €59.07. The company posted nine month sales up 7.8% to €6.83 billion on a like-for-like basis, and EBITA 17.5% higher year-over-year at €590 million. Nine months net profit came in up 22.4% at €311 million. The numbers are a touch above expectations.

Metro AG was up €0.11 to €37.78. The company 's DIY retail unit, Praktiker, will reportedly make its stock market debut on 18 November. Meanwhile, PlatowBrief speculates that the company will lower its fiscal year targets on Wednesday when it presents its third quarter figures as business in Germany remains challenging. A consensus view compiled by Reuters puts quarterly revenues at €14.08 billion and net income at €128 million.


STMicro (STM ) was up €0.30 to €13.59. Global semiconductor sales for September 2005 surged 5.2% month-over-month and 5.6% year-over-year to US$19.55 billion, the Semiconductor Industry Association (SIA) says. Semiconductor sales for the first nine months of 2005 totaled US$167.6 billion, an increase of 6.1% from a year earlier, it adds.

RCS Media was up €0.04 to €4.29. The company upped its stake in Italian web/mobile VAS provider Dada to 23.6% buying 1.3 million shares (8.2% stake) at €14.3 per share. Also the company negotiated a call option on additional 1.5 million (9.2% stake), expiry on November 15, 2005, at €13.4 per share, with €0.9 per share premium. Domestic sources note the exercise of the option would lift the stake at 32.8%, triggering an obligatory PTO. Dada shares rose €1.52 to €15.15. Separately, BPI is in no hurry to sell Ricucci's nearly 15% stake in the company held by the Italian bank as security for a €850 million loan, reportedly.

Netherlands br>

ASML (ASML ) was up €0.03 to €13.99 in the wake of the increase in global semiconductor sales reported by the SIA.

ABN AMRO (ABN ) was up €0.63 to €19.75.The company reported nine months operating income of €4.599 billion, +28.1% (third quarter €1.82 billion); net attributable profit €3.122 billion, +16.9% (third quarter €1.204 billion); EPS of €1.73; provisions of EUR 361 million, -19.6% (third quarter €200 million). ABN says given the very good results in third quarter, it now expects second half net profit (excluding incidental items such as the proceeds from the sale of Real Seguros and Nachenius, Tjeenk & Co) to be at least the same as first half net profit of €1.882 billion. Brokers are pleased with the results: Deutsche Bank upgrades to buy from hold and raises target to €22.30 from €20.90. Cheuvreux raises target to €21.5 from €20.0, but keeps underperform. ING reiterates buy, €23.0 target.

TNT was up €0.30 to €19.70. The company reported third quarter EBIT up 2.1% to €246 million on revenues up 8.6% to €3.23 billion. Net profit was up 0.7% to €148 million. EPS was up 5.2% to €32.5 million. Mail operating margin fell to 16.2% vs 16.4%, but Express' margins rose to 7.8% vs 6.2%. Margins in logistics fell to 1.2% vs 4.0%. Still, the company guided for fiscal year margins of 19%-20% in Mail and raised guidance in Express to 9.0% from 8.5%-9.0%. It expects Logistics' margins at 4% for the fiscal year. CEO Peter Bakker says the company has started to work with Japan Post on a joint strategic vision. Bakker says the company's next step will be to launch a new international premium express product.

Nordic br> Statoil was up NOK2.75 to NOK141.50. The company reported third quarter profit before financial items, income taxes and minority interest up 48% to NOK23.87 billion on total revenues up 28% to NOK105.14 billion. Net profit was up 49% to NOK8.68 billion. EPS were NOK4.01 vs NOK2.69. Statoil says the increase was mainly due to a 35% increase in the average oil price measured in NOK; a 27% increase in natural gas prices; and a 17% increase in oil and gas production.

Spain br> Telefonica (TEF ) announced that it has agreed to an offer with the UK's O2 for a takeover at £2.00 per share, or £17.7 billion. The company says the deal will provide enhanced scale by entering two of Europe's largest markets, Germany and the UK, with critical mass. It figures this deal will generate an estimated run rate of €293 million of annual operating cost and capital spending synergies by 2008. Telefonica says the deal will be immediately accretive to EPS and free cash flow per share. Fitch places the company 's ratings on watch negative. DrKW notes the company has denied interest in O2 in the past and therefore there may be credibility issues. The company's shares were suspended Monday.

Switzerland br>

Novartis (NVS ) was up CHF0.50 to CHF68.35. The company agreed to buy the rest of US-based Chiron (CHIR ) for US$5.1 billion, or US$600 million more than an original bid which which was not accepted. The company already owns a 42.2% stake in Chiron but now as it buys the remaining stake, it will be in a position to turn around the troubled U.S. vaccine maker.

United Kingdom

O2 was up £0.41 to £2.06. Telefonica and the company have agreed to a takeover at £2.00 per share, valuing the company at £17.70 billion. The company will retain its existing brand and will continue to be based in the UK. Dresdner KW downgraded the shares to hold from buy and upped its target to £2.05 from £1.70. Shares rise above bid price on hopes of a counterbid. Sources mention Deutsche Telekom as a possible rival.

P&O was up £1.06 to £4.16. Danish group Moeller-Maersk declined to comment on reports that it could bid for the company , following reports that Dubai's DP World has approached the company about a bid. The company confirms it has received a very preliminary contact from a third party, which may or may not lead to an offer, following press reports that The FT says the move made last week remains tentative, but meeting are likely between the two parties soon. The paper add the approach could spark a multi-billion pound bidding war, with Moeller-Maersk and Hong Kong's Hutchison considered likely counterbidders. UBS upgraded P&O shares to neutral from reduce and raised its target price to £3.60 from £2.86.

Pilkington was up £0.24 to £1.51. The company has confirmed having been approached by an unidentified bidder but has made no further comments. The stock soared earlier today on speculation France's Saint Gobain may switch its attention after failing to secure a significant stake in BPB.

Prepared by Zaida Espana, Michael Sanderson, Mariella Mongio, Alexander Wisch, Holly Cook, Emma Stevenson, Pawan Girglani, and Rocio Opazo-Aniotz (Standard & Poor's); Alex Halperin (BusinessWeek Online)

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